Why Bitcoin Price Crashed To $65K?
Why Did BTC Hit a Four-Week Low Despite Softening Inflation Data?
Dear Loyal Subscribers,
This week has been a challenging period for the cryptocurrency market. Bitcoin (BTC), the leading cryptocurrency, fell to its lowest price in four weeks. On Friday, BTC dropped more than 2% in an hour, falling from around $67,000 to $65,100 during the U.S. trading session. Over the past seven days, Bitcoin's value has decreased by 7.5%.
Declines in Altcoins
Other cryptocurrencies faced even steeper declines. Ether (ETH) dropped to $3,400, losing over 10% in the same period. Native tokens of rival layer-1 networks, including Solana (SOL), Avalanche (AVAX), Cardano (ADA), and Near (NEAR), experienced declines ranging from 15% to 20%, according to CoinGecko data.
Impact on Leveraged Trading Positions
The rapid downturn resulted in significant liquidations in the leveraged derivatives trading positions across all crypto assets. In the past 24 hours, nearly $180 million in leveraged positions were liquidated, mostly affecting long positions betting on price increases. Over the course of the week, total liquidations surpassed $870 million, indicating a significant reduction in market leverage, as reported by CoinGlass.
Inflation Data and Bitcoin
Bitcoin’s price often responds to inflation data and monetary policy signals, as some investors view it as a hedge against inflation. Positive consumer price index (CPI) data can strengthen the dollar and lead to higher interest rates, reducing Bitcoin's appeal as an alternative investment. Conversely, softer inflation data, as observed in April 2024, can boost Bitcoin prices by lowering expectations of aggressive rate hikes.
Unfulfilled Expectations
Analysts and many market participants had anticipated a breakout for Bitcoin to new record highs, supported by expectations of slower inflation and softer economic data. However, attempts to rally were quickly sold off, causing BTC to remain within its sideways trading range.
The Federal Reserve's Projections
The Federal Reserve's projection of only one rate cut for this year, less than previously forecasted, dashed investor hopes for looser monetary policy in the summer. Additionally, political uncertainty in Europe, including a snap election in France, pushed the U.S. dollar index (DXY) to its highest level in over a month, putting further pressure on Bitcoin.
Selling Pressure from Miners and Long-Time Holders
Bitcoin also struggled with increased selling pressure from miners and profit-taking from long-time holders near the $70,000 area. This selling activity weighed heavily on the broader crypto market, according to 10X Research.
Overall, this week has underscored the volatility and unpredictability of the cryptocurrency market, reminding investors of the complex factors that influence crypto asset prices.
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